Australia's population growth rate continues to ease: CBA's Gareth Aird
GUEST OBSERVER
Australia’s population rose by 0.3% over QII and annual growth held steady at 1.4%.
Australia’s population is estimated to be 23.8 million as at June 2015.
Net migration continues to be the driver of population growth, although its contribution to growth has eased.
The big picture
Australia’s population growth rate has been easing as a result of a slowdown in net overseas migration. The decline in the population growth rate has been a contributing factor to why potential growth in Australia is now estimated to be around 2¾% (potential growth was previously assumed to be around 3¼%). Weak productivity growth and the ageing of the population have also weighed on potential growth.
Australia’s population growth rate was over 2% in 2009.
Notwithstanding, at 1.4%pa, Australia’s population growth rate is still a lot faster than most other OECD countries. This means that the economy needs to be expanding at a faster pace than most other OECD countries to achieve full employment.
The major driver behind Australia’s population growth continues to be net overseas migration (NOM). However, its contribution to population growth has come down over the past few years. Both sides of federal politics favour high levels of immigration to partially offset some of the effects from the ageing of the population.
The ‘grey army’ – those aged 65 and over – continue to grow as a share of Australia’s population. The growth of this age cohort underpins the structural decline in labour force participation. That said, there has recently been a cyclical bounce in the participation rate due to a lift in the demand for labour. The aging of the population has increased the dependency ratio (the age‑population ratio of those typically not in the labour force) which underpins the need for fiscal reform.
The detail
Australia’s population is estimated to have risen by 73k in QII (+0.3%). The lift takes the population to 23.8 million as at June 2015. The ABS estimates that NOM was 168k in 2014/15, down from 189k in 2013/14. And well down from the peak of 315k in 2008.
State outcomes are mixed, but population growth rates have been converging. The decline in mining investment and associated downturn in mining‑related employment has contributed to a sharp slowdown in WA’s population growth. Victoria’s population growth rate is the highest across the States. Strong population growth in the Garden State underpins the big lift in residential construction in Melbourne.
Table 1 - Population Growth Q2 2015
Gareth Aird is economist at Commonwealth Bank and can be contacted here.